Lukoil – State on Its Own Inside Bulgaria

The Bulgarian Prosecutor’s Office is demonstrating lately enormous effort to take legal action against people openly supporting Moscow, labeling them “Russian spies”, but it is ignoring the powerful financial and oligarchic empire around Russia’s oil giant Lukoil in Bulgaria. Lukoil is an engine powered by all fuel consumers and draining national resources. At the same time, it uses kickbacks and blackmail to control key Bulgarian politicians, thus installing Russian influence in the economy and the social and political processes in our country.

The spies who are not hiding

In September, the Bulgarian Prosecutor’s Office charged the Chairman of the National Movement Russophiles, Nikolay Malinov, with espionage. It also banned Leonid Reshetnikov, who is a retired Russian intelligence lieutenant general, from entering the country for ten years.

Malinov is accused of handing classified information to the Russian organizations “Double-headed Eagle” and the Institute for Strategic Studies where Reshetnikov is a leading figure. The public prosecution claims that it has documents linking to the spy affair the owner of the collapsed Corporate Commercial Bank (CCB), Tsvetan Vassilev, the arms dealer, Emilian Gebrev, and the “Russian Orthodox” oligarch Konstantin Malofeev. They had become suspects due to their participation in several deals, such as those for the companies Vivacom and Dunarit. Obviously, at this stage, the Prosecutor’s Office is retorting to suggestions, not accusations because Tsvetan Vassilev and Emilian Gebrev have nothing to do with the espionage case.

A Bivol investigation, published as early as 2015, reveals all of this information without the espionage element.

The spy saga continued with a diplomatic note, whereby Vladimir Rusyaev, the First Secretary of the Embassy of the Russian Federation in Sofia, had to leave Bulgaria because of his serious ties with Russia’s Main Directorate of the General Staff of the Armed Forces of the Russian Federation (GRU). Counterintelligence experts commented before Bivol that, apart from the ostentatiousness, such a “counteraction” to foreign services by the National Security Agency (DANS) and the Special Prosecutor’s Office could only have negative effects. According to them, the note contradicts the written and unwritten rules of counter spying as instead of being tracked, the suspect was simply taken outside the country.

Meanwhile, the accused Nikolai Malinov travelled freely to Moscow to receive an award and an Order from Vladimir Putin precisely for his pro-Russian activity in Bulgaria, making things even more grotesque. Attorney General Sotir Tsatsarov expressed utter surprise regarding Malinov’s trip. The embarrassment turned international when US President Trump raised the subject before Bulgarian Prime Minister Boyko Borisov during their recent meeting at the White House.

From “Russophiles for Geshev” to Valentin Zlatev

While the Prosecutor’s Office was making efforts to appear to be “crushing” the operators of Russian influence in Bulgaria, and in particular, the Russophiles movement, the President of a pro-Russian organization led the march in support of Sotir Tsatsarov’s successor, Ivan Geshev. Vesselin Ognyanov Kostov, a representative of the NGO National Movement Khan Kubrat, turned out to be a strong supporter of the newly elected Attorney General.

In his Facebook profile, Kostov boasts that Khan Kubrat had supported the “Night Wolves” when they visited Bulgaria. The Russian organization maintains close ties with the Kremlin and professes a nationalist and Eurasian ideology, similar to General Reshetnikov’s.

Strangely enough, instead of protesting against the accusations against the Russophiles, Kostov strongly supports Geshev. He and his NGO are affiliated with the construction company GP Group. In 2017, GP Group’s leadership honored Khan Kubrat as a “non-governmental organization founded by people who love Bulgaria and the Bulgarian traditions”.

The company does not specify the exact nature of its support for the NGO, though it is most likely financial. On its part, GP Group is affiliated with the former CEO of Lukoil Bulgaria Valentin Zlatev, who is considered its hidden owner. While Zlatev was the Head of Lukoil, GP Group built most of the company’s facilities in Bulgaria.

Following a large-scale investigation by Bivol into the abuse of European funds and public procurement, GP Group became a “client” of the prosecution. Charges were pressed against two of its bosses and prosecutors blocked a EUR 14 million transfer abroad. At first glance, there is no logic for pro-Russian NGOs to support prosecutors in such a situation. Unless the prosecution’s behavior is just a show for the public.

How “Russian resident” Zlatev helped the rise of Boyko Borisov

Evidence of Russian services’ intervention in Bulgarian and specific promoters of Russian influence dates back from over a decade. In diplomatic cables from 2006, US Ambassador to Bulgaria John Beyrle notes that Borisov maintains close financial and political ties with the Director of Lukoil Bulgaria, Valentin Zlatev.

Information about Lukoil’s role in the business rise of Borisov’s security company IPON is even older. IPON became a factor after receiving a contract to guard the pipes and equipment of the Lukoil refinery in the late 1990s. Beyrle’s report reflects it in detail:

“14. (S/NF) Borisov has close financial and political ties to LUKoil Bulgaria Director Valentin Zlatev, a vastly influential kingmaker and behind-the-scenes power broker. Borisov’s loyalty (and vulnerability) to Zlatev play a major role in his political decision making. The Mayor has engaged LUKoil in a number of public-private partnerships since taking office: LUKoil has agreed to donate asphalt for the repair of city streets, take on the upkeep of a Soviet Army monument, and finance construction of low-income housing. In a reciprocal gesture, Borisov has advocated using municipal land to develop new LUKoil stations. Though this may seem a significant quid-pro-quo, Borisov’s public agreements with LUKoil are only side deals in his much deeper and broader business relationship with Zlatev, which has been reported in other channels.”

We read the following in another cable, this time from 2005, signed by another former US Ambassador to Bulgaria, James Pardew:

“LUKOIL,s representative in Bulgaria is VALENTIN ZLATEV. The Russian petroleum company is estimated to be the largest corporate taxpayer in Bulgaria. It also controls Russian oil exports to Bulgaria. Lukoil’s Bulgarian operations, through Zlatev, are suspected of strong ties to Russian intelligence and organized crime.”

Two and half years after Beyrle, US Ambassador Nancy McEldowney wrote that “US diplomats are also aware that Zlatev was also a big financial supporter of the BSP (Bulgarian Socialist Party – editor’s note). Whether because of his closeness to GERB or because of the BSP, but something prevents the National Security Council and then the SANS (DANS) and the prosecutor’s office from investigating Zlatev for corruption or Chapter One of the Penal Code.”

Bivol published all cables that had leaked to WikiLeaks.

The irreplaceable Zlatev was nevertheless removed from his post in Lukoil, following an investigation by Bivol that revealed that tens of millions had been syphoned off from Lukoil through companies affiliated with Zlatev himself. However, his influence on the Bulgarian Prime Minister and likely dependencies follow another line. To trace it, the genesis of the Litasco company must be recalled.

Deliveries to Lukoil’s refineries in Europe had passed for a long time through the Swiss-registered Litasco. By the middle of the last decade, there was also Litasco Bulgaria. Its activity was discontinued in 2006. Its owner had been “Lukoil Neftochim Burgas” and its manager – Vladimir Alexandrovich Braun. The latter is a key figure in the corporation. Apparently, he had liked Bulgaria because he turned out to be a depositor in CCB with EUR 54,000 and USD 64,000.

More interesting, however, is the procurator of Litasko Bulgaria, the notorious Alexander Chaushev. He had been standing close to Valentin Zlatev since the time of the joint Russian-Bulgarian company Rosbulneft. In 1999, Lukoil purchased the Russian share of the company and acquired the Bulgarian share through a privatization transaction.
Precisely Chaushev, who now works for Sopharma, turned out to be the listed owner of the house in Barcelona. The former President of the Sofia City Court, Vladimir Yaneva, claimed that Boyko Borisov had purchased the house for a woman for whom he had had special feelings.

Dogan’s Shadow

The rationale for the relationship between Valentin Zlatev, Lukoil Bulgaria and Russia’s intelligence services does not rest solely on US diplomatic cables. Perhaps the most serious sign is the proximity to the Movement for Rights and Freedoms (DPS), the party largely representing the Muslim minority in Bulgaria.

The DPS honorary lifetime chairman, Ahmed Dogan, is the user and the likely real owner of a luxury coastal mansion, erected near Lukoil’s “private” port close to Cape “Chukaliata”. Bivol was the first to tell the story of Dogan’s “Seraglio” back in April 2016.

Since the privatization of Neftochim-Burgas, Lukoil owns the coastal territory on which the building stands. In 1999, the government of Prime Minister Ivan Kostov gave to Lukoil the refinery in Burgas, along with a nearby Russian oil depot, for the measly amount of USD 101 million, of which only 80% had been paid in cash. It is believed that at the time of the privatization, more than 30% of Lukoil’s shareholders had been US individuals and legal entities. However, the fact is that then-President Petar Stoyanov had reported interest from Western companies, which Kostov ignored and chose Lukoil. The refinery deal is still considered one of the most shadowy occurrences in the process of mass privatization.

The Lukoil Retirement Funds have sold nearly 320 acres of the land near Rosenets to the Russian company Straight-line. Behind it stands the Cypriot offshore TROXY TRADING, whose owner is another offshore from the British Virgin Islands, FCM GROUP HOLDING. According to Bivol’s sources, Valentin Zlatev is behind Straight-line.

The apparent connection between Zlatev and Dogan is attorney Alexander Velichkov. He is the Head of the Legal Directorate of Lukoil Bulgaria and participates in the Boards of the Retirement Insurance Company Lukoil Garant-Bulgaria and the Voluntary Retirement Fund Lukoil Garant-Bulgaria, which had sold the land. At the same time, Velichkov represents TROXY TRADING, which is located in his office.

Thus, the same parties appear on both ends of the transaction, and the transaction itself appears fictitious. In March 2014, Straight-line sold about nine acres of land to Hermes Solar Ltd. for the ridiculous BGN 1.7 million. The buyer company had been registered at the beginning of 2011. The majority owner is Hayrie Syuleyman Hadzhiyska. She holds 85% of the company’s initial capital. The woman was the secretary of Dogan’s personal assistant, Ahmed Emin, in charge of cash flows to and from the party. Mustafa Shan holds 5% of Hermes Solar’s capital.

We recall that Emin died in mysterious circumstances on October 17, 2008, in Dogan’s “Seraglio” in the Sofia suburb “Boyana”. The prosecution declared the case suicide. Immediately after the land transfer, Hayrie and Shan had decided to sell their shares in the company and leave its management. However, the address and the contact information listed in the Commercial Register give enough reasons to believe that the company is still part of the notorious circles of companies of the DPS.

With the new management, Hermes Solar had started the construction of the waterfront Seraglio. The funds had come from bank loans. The company has two loans from CCB. The first one is from March 2012 for BGN 12 million and has overdue interest of BGN 100,000. The second one – for nearly BGN 7 million is from July 2013 and the overdue interest is BGN 50,000. They are categorized as “bad loans” without sufficient collateral. Both loans had been refinanced by First Investment Bank (FIB or Fibank), where media mogul and DPS lawmaker Delyan Peevski transferred its loans shortly before the CCB bankruptcy.

Two years later, the Seraglio was completed. Ahmed Dogan also received the nearby port, which had been written off as exclusive State property. Attempts had been made to chase all the beachgoers from the area. Subsequently, in 2018, Hermes Solar also became a concessionaire of the Rosenets-North beach.

Through Vasily Mikhailovich Ribaulin, who is already a former shareholder in Hermes Solar, the company is linked to the Eremenko family – Igor Nikolaevich, his wife Natalia and their son Roman Eremenko. In addition to being businesspersons and hoteliers, they are obviously very close to the various Night Wolves bike clubs, welcoming the clubs’ celebrations in their hotels.

The social network profiles of the Night Wolves unit in Bulgaria’s Black Sea city of Varna clearly show that the Bulgarian bikers maintain a close connection with the Russian parent club. There are Facebook photos of members of the Bulgarian club with Alexander “The Surgeon” Zaldostanov, the founder of Night Wolves in Russia. However, there are also photos with the Russian Ambassador to Bulgaria Anatoli Makarov, Bulgarian President Rumen Radev and the leader of the Bulgarian Socialist Party (BSP) Kornelia Ninova.

Nevertheless, Hermes Solar mostly outlines the link between Lukoil and Ahmed Dogan. He is a former agent of the Communist-era State Security (the regime’s secret services). In 2016, Turkey banned Dogan along with Delyan Peevski from the country.

The reason for the restriction was the pro-Russian position of the DPS in the crisis that occurred between Turkey and Russia after a Turkish Air Force F-16 fighter jet shot down a Russian Sukhoi Su-24M attack aircraft.

Shortly before Turkey’s announcement that Dogan and Peevski are personae non grata there, it became clear that there had been a concentration of Turkey’s National Intelligence Organization (MIT) agents in the area around the Berlin Hotel and “Belovodski” Road, at that time, the respective Sofia residences of Peevski and Dogan. Whether as part of an active measure or by accident, around that time a well-known Sofia car thief stole an AUDI Q7 SUV with registration number TR 16 ACH 92, used by the Turkish intelligence. Business cards of MIT employees were inside the SUV. The vehicle had been stolen from a SPA hotel in the Sofia suburb of Dragalevtsi, owned by a relative of the then-Deputy Defense Minister.

Subsequently, security sources confirmed the above story. The vehicle had been returned against ransom. According to sources, Mladen Marinov, the current Interior Minister and then Chief of Sofia’s Police Directorate had collected it personally. At that time, there were two reasons for the increased interest of Turkish intelligence in Dogan and Peevski – links with Russia and smuggling of Bulgarian cigarettes in Turkey and the Middle East.

To summarize – Lukoil companies give the pro-Russian Ahmed Dogan land on “preferential” terms to build a lavish summer residence there. We can only speculate whether this had been a gainful transaction for services to the Russian intelligence or for lobbying before the Bulgarian institutions.

Monopoly and untouchability

Lukoil has been repeatedly investigated for abuses in European Union (EU) countries. In 2014, the Romanian Prosecutor’s Office accused its local unit of fraud and money laundering, suing the company for EUR 1.8 billion. However, the case was closed in 2017.

In Bulgaria, the company is practically a monopolist, not held accountable for anything. Its dominance extends to all local facilities for the import and processing of crude oil, as well as for the storage, transportation and export of petroleum products. The main oil port of Lukoil near Rosenets is actually a Russian “enclave” where there are no representatives of the Bulgarian authorities, including Customs officials, as an investigation by Bivol found.

The company is the only supplier of fuels for sea and river ships and aircraft at the national airports of Bulgaria. Lukoil is the main, and in reality, the only fuel supplier for all institutions and services, including the police and the army. The rest of the companies are just intermediaries that also offer its product. Bulgarian legislation requires excise goods to be stored in tax warehouses that are licensed. In 2011, the Bulgarian Ministry of Finance announced that Lukoil directly controls 80% of the tax warehouses for fuels. In fact, the company indirectly controls over 95% of them.

Lukoil exports all profits from its activities in Bulgaria entirely outside the country. In 2017, the company claimed to have paid over 32 billion in taxes, excise duties and others. According to official figures, it has paid only 151 million in profit tax for all the time since the privatization.

Due to the lack of effective controls, the State does not know how much oil is imported by Lukoil, how much fuel is exported, how much is sold domestically and how much tax is being paid. There is a hypothesis that not all the VAT and excise duties due are accounted for, while they make up a large part of the final fuel price. In reality, this means that Bulgarian citizens, companies, and the government subsidize Lukoil in their country.

The late Customs Director, Vanyo Tanov, was the only one to make an attempt to disrupt Lukoil’s extraordinary tax comfort. He briefly revoked the company’s license for failing to comply with its obligation to install fuel meters. Paradoxically, the State’s effort to collect its dues was thwarted by then US Ambassador James Warlick, who made a deliberate public visit to the refinery and spoke very favorably of its work.

After this diplomatic intervention, the Lukoil fuel meters topic waned. Ambassador James Warlick ended his term in Bulgaria, left the State Department in 2016 and started working at the Russian law firm “Egorov, Puginsky, Afanasiev and Partners”, founded by a college classmate of Vladimir Putin.

This research was enabled by “Reporters in the field”, a program by Robert Bosch Foundation hosted together with the media NGO N-ost.

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